ER to HF or other buy-side: What should I learn?
I'm starting a job in ER out of undergrad and would like to eventually move to a HF or other buy-side role. What should I be learning/focusing on?
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Hi Thelonius Monkfish, just trying to help:
Fingers crossed that one of those helps you.
It's a cliche but learn how to think like an investor & critically evaluate the investment thesis your lead analyst / key clients have on the stocks you cover.
A lot of the work you will be doing early on will be a) maintenance research updating models around earnings / keeping up to date on newsflow, b) coordinating corporate access / conferences c) updating big databases of industry indicators (not trying to be dismissive of this last one - this stuff is super valuable for the buy side as it saves us huge amounts of time).
None of this teaches you to be an investor. What people will be looking for in buy-side interviews is an ability to articulate why a stock is a long/short, ideally backed up by some kind of differentiated research insight that is more than just going through annual reports / building a model and sticking some assumptions in. The thesis could be something like 'this retail stock is going to miss guidance this quarter because they have been overly promotional in the run-up to Black Friday based on x dataset we have that the market isn't on top of' for a citadel/millenium type HF or 'we did 100 contact calls with people implementing ERP systems and think that migrations to the next generation of cloud-based software are accelerating, which will drive an inflection in earnings next year' for a longer term place.
So spend as much time as you can trying to understand why your analyst has the recommendation they do on each stock, and try to go to as many client meetings with them as possible to hear the pushback from investors on their thesis.
Lastly - if you want to apply to HFs make sure you understand what differentiates a short from a sell. E.g. understand all the technical issues around implementing a short (short interest / days to cover / disclosure thresholds / cost of borrow etc) as well as how the risk/reward profile differs from a long.
Would you say it's more important to have shorter-term outlooks on these names rather than a secular outlook
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